Hindu undivided family[huf] (3)

1. HINDU UNDIVIDED FAMILY[HUF] RAKSHITH.S TAPSHINI MOHANTY

2. introduction It is a specific form of business organisation found only in India. HUF is a separate and distinct tax entity that i.e. the income of a HUF can be assessed in the hands of HUF only and not in the hands of any of its members. Hindu Undivided Family do business under the control of the head of the family is known as ‘ karta . The members of the family is known as ‘co- parceners ’ of Hindu undivided estate. HUF is a ancient form of commerce, business works around a tradition routed in hierarchy. The male(and now even female)members of biological family run a business together and hand it down from generation to generation.

3. Features : FORMATION : Joint Hindu family cannot be formed or created by any contract or agreement because this organisation came into existence because by the operation of Hindu succession act 1956. MEMBERSHIP : it requires minimum of 2 people {at least one male member} KARTA: Is the elder male member of the family, who controls and manages the business. CO-PARCENERS: Other family members who by birth acquires an interest in the joint property of the family, whether inherited or acquires by the family. There is no limit for membership because membership is by birth.

4. FEATURES : LIABILITY : The liability of the KARTA is unlimited because he is the only deciding authority, Whereas the liability of CO-PARCENERS is limited upto their share in the capital of the family. SHARING OF PROFIT AND LOSSES : According to Hindu Succession Act,1956,all the members of Hindu Undivided Family have equal rights to share the profits as well as losses of the business. CONTROL : the control of the family lies with the karta . He takes all te decision and authorizes to manage the business.

5. Features : CONTINUITY AND STABILITY : This organization enjoys long and stable life as it is not affected by death, insolvency, insanity of any of its member.In other words if KARTA dies and became incapable of managing the business then the succeeding CO-PARCENERS will act as KARTA. MINOR MEMBERS : the inclusion of an individual into the business occurs due to birth in a Hindu undivided family . BUSINESS SECRECY : There is a great deal of business secrecy in the organization. The business secrets are known to the CO-PARCENERS in general and KARTA in particular. It is not obligatory for them to publish their accounts, which results in great deal of privacy and secrecy

6. FEATURES HUF AS A PARTNER IN A PARTNERSHIP FIRM : to become a partner in a partnership firm, the partner should be a natural person or recognized as person by the law . Since, HUF is not a "person", but only group of persons belonging to the same family and carrying on the family it cannot act as a partner. Unlike a company, a HUF has no separate existence from its members. A Company as a separate entity can enforce its rights, whereas, a HUF, has to be necessarily represented by a Karta or an adult member for enforcing any of its rights. A HUF cannot be treated as a person . TAXATION: according to the Income-tax Act, 1961 ("the Act") & Wealth Tax Act, 1957, a Hindu Undivided Family ("HUF") is treated as a separate person for the purpose of taxation.

7. features Tax incidence can be lowered by considering effective tax planning under HUF structure. HUF member cannot be taxed in respect of any sum which he receives as member out of family income. There may be several items of fully exempted such as agricultuaral income,dividend income etc.which could be planned for the each of family member and also for the HUF to secure high level of zero income tax for the family.

8. Pros and cons : PROS : Ease of formation. Continuity of operations. Effective control Increased loyalty and cooperation CONS : Confined to Joint Hindu Families. Relatively limited capital. Limited managerial talents. Unlimited Liability of the KARTA.

9. Different schools of Hindu law: There are two schools of Hindu law-  Dayabhaga and Mitakshara . Dayabhaga :   This school of law prevails in West Bengal and Assam. Under this school of law a son does not acquire any interest by birth in an ancestral property. Son acquires such interest only after the death of his father. Thus, the son does not enjoy the right to demand partition during the lifetime of his father. In view of this, the father enjoys an absolute right to dispose of the property of family according to his desire . It can thus be said that there is NO COPARCENER in Dayabhaga School of law till the death of father. After the death of father, sons become coparceners in respect of property left by father and income arising there from is taxable as income of Hindu undivided family.

10. DIFFERENT SCHOOLS OF HINDU LAW : Mitakshara :  This school of law applies to whole of India except West Bengal and Assam. The coparcenary under this law is a fluctuating body which is enlarged at the time of each birth and reduced at the time of each death of a coparcenary child.

11. Hindu Undivided Family,is a paradigm for following Joint Family Business to achieve the higher mark in the context of Entrepreneurship and leading the precise business plan for development of Economy. CONCLUSION